Today’s Top News & Analysis
Egyptian Parliament approves new taxes
Egypt’s auto sales drop 69% y/y in April 2023
Egyptian Ministry of Agriculture releases amounts of corn and soybean
ETEL Q1 2023: Strong y/y earnings growth on better performance across the board
MFPC Q1 2023: Below-the-EBIT line items save the day
RACC Q1 2023: Higher profitability on higher revenues
RAYA Q1 2023: Higher earnings on revenue growth, margins, and FX gains
MTIE preliminary Q1 2023: Extraordinary net profits on higher revenues and margins
EFID Q1 2023: Strong earnings growth on higher volumes and prices as well as FX gains
ETRS Q1 2023: Interest income saves bottom line
ATQA Q1 2023: Non-operational items save the bottom line
MACRO
Egyptian Parliament approves new taxes
The Egyptian Parliament approved new taxes as follows:
· 5-20% as entertainment tax.
· Fees on duty-free products.
· 10% on some exported and luxury products.
· Introduced a new 27.5% higher rate of tax for people earning more than EGP1.2mn a year.
· Raising personal income tax exemption from EGP24,000 to EGP36,000.
· Flat tax rates for businesses with revenues less than EGP10mn per year.
· 10% capital gain tax on only 50% of the realized gains, as an incentive for investors to subscribe to IPOs. It should drop to 25% after two years of the legislation.
· Income from investments in venture capitals, real estate, investment funds, holding companies, and equity funds, should be subject to 5-10% CGT. (Enterprise)
Egypt’s auto sales drop 69% y/y in April 2023
According to Automotive Marketing Information Council (AMIC), Egypt’s auto sales volumes declined to 5,100 vehicles in April 2023 (-69% y/y) as:
· Passenger car sales volume fell to 3,800 vehicles (-70% y/y).
· Bus sales fell by 59% y/y.
· Truck sales fell by 69% y/y. (Enterprise)
Egyptian Ministry of Agriculture releases amounts of corn and soybean
Last week, the Egyptian Ministry of Agriculture released 221,000 tons of corn worth USD80mn and 33,000 tons of soybeans worth USD25mn, in addition to fodder worth USD10mn. (Mubasher)
Corporate
ETEL Q1 2023: Strong y/y earnings growth on better performance across the board
Telecom Egypt [ETEL] posted Q1 2023 net profits of EGP3.8bn (+179% y/y), while normalized net profits hit EGP4.1bn (+144% y/y), thanks to:
· Higher revenues of EGP14.0bn (+48% y/y), with wholesale and retail revenues growing by 98% y/y and 22% y/y, respectively:
o Wholesale revenue growth was driven by domestic wholesale (+83% y/y) on Indefeasible Right of Use (IRU) one-offs, and international customers & networks (+154% y/y) on higher IRU capacity sales to tech-giants and ancillary services (O&M) one-offs.
o Retail revenue growth was driven by a higher customer base (voice, data, and mobile subscribers rose 5%, 7%, and 22% y/y, respectively) and higher ARPU (fixed-data ARPU rose 9.5% y/y to EGP161, and fixed-line ARPU rose 2% y/y to EGP33).
· EBITDA growing 72% y/y to EGP6.1bn, implying an EBITDA margin of 44%.
· Vodafone Egypt’s (VFE) organic income rose 82% y/y, excluding debt-related FX losses, while the share of profits from VFE rose 184% y/y. (Company disclosures: 1, 2, 3)
MFPC Q1 2023: Below-the-EBIT line items save the day
Misr Fertilizers Production Co. (MOPCO) [MFPC] announced the full results for Q1 2023, where:
· Net income grew by 17% y/y to EGP2.4bn on the back of:
(1) 10x y/y higher net financing income of EGP264mn.
(2) Enormous FX gains of EGP1.1bn.
· Although urea prices have been declining since the beginning of the year, revenues increased by 21% y/y to EGP5bn, thanks to the EGP devaluation which inflated export revenues. However, the USD-based cost also inflated at a faster pace, which in turn severely pressured GPM down to 39% from 61% a year before.
Our 12MPT for MFPC is EGP220/share with a Neutral / Medium Risk rating. MFPC is currently traded at an annualized P/E of 3.9x. (Company disclosure)
RACC Q1 2023: Higher profitability on higher revenues
Raya Contact Center [RACC] reported Q1 2023 net profits of EGP47mn (+563% y/y) due to:
· Higher revenues of EGP456mn (+77% y/y) (including the government support), driven by the increase in off-shoring revenues (USD) of EGP308mn (+143% y/y).
· Gross profit margin expanded by 2pp y/y to 35%.
· FX gains of EGP20mn compared to FX losses of EGP2mn in Q1 2022. (Company disclosure)
RAYA Q1 2023: Higher earnings on revenue growth, margins, and FX gains
Raya Holding for Financial Investments [RAYA] reported net profits of EGP143mn (+217% y/y) on higher revenues of EGP6.5bn (+46% y/y). Meanwhile, GPM expanded by 2.2pp y/y to 20.9%. Earnings growth was also driven in part by an FX gain of EGP24mn and higher investment income of EGP26mn. (Company disclosure)
MTIE preliminary Q1 2023: Extraordinary net profits on higher revenues and margins
MM Group for Industry & International Trade [MTIE] reported net profits of EGP153mn (+200% y/y) on higher revenues of EGP2.5bn (+28% y/y). Meanwhile, GPM expanded by 2pp y/y to 11%. (Company disclosure)
EFID Q1 2023: Strong earnings growth on higher volumes and prices as well as FX gains
Edita Food Industries [EFID] reported Q1 2023 net profits of EGP374mn (+153% y/y) on higher revenues of EGP2.8bn (+78% y/y). The cakes segment revenues more than doubled to EGP1.5bn (+115% y/y), raising its contribution to total revenues by 9pp y/y to 54%. Overall revenue growth was driven by both sales volume and selling prices, as follows:
· Blended sales volumes increased by 34% y/y to 1.04bn packs.
· Blended average selling prices increased by 41% y/y to EGP34.8/pack.
Meanwhile, the strong earnings growth is attributable to higher revenues, along with:
· SG&A-to-revenues ratio improving by 5.1pp y/y to 15.1%.
· FX gains of EGP47mn vs. FX losses of EGP5mn.
In terms of margins, the gross profit margin dropped by 4.1pp y/y to 32% due to the mounting pressure of direct material costs, while the EBITDA margin rose marginally to 19% (+0.2pp y/y). (Company disclosure: 1, 2)
ETRS Q1 2023: Interest income saves bottom line
Egytrans [ETRS] Q1 2023 net income came at EGP25.6mn (+80% y/y) on revenues of EGP86.6mn (-8.1% y/y). The increase in the bottom line is attributed to a higher gross profit margin of 23.2% (+2.3pp y/y) and a higher net interest income by more than triple y/y of EGP22.7mn. (Company disclosure)
ATQA Q1 2023: Non-operational items save the bottom line
Misr National Steel (Ataqa) [ATQA] released its Q1 2023 financial results, posting net profits of EGP129mn (+90% y/y) on lower revenues of EGP400mn (-54% y/y) with a gross profit margin of 19% (+10pp y/y). Higher earnings growth was driven by:
· 53% lower SG&A of EGP15mn.
· Higher investment income of EGP65mn (+367% y/y) from Treasury bills and equities.
· A gain of EGP109mn (+426% y/y) from the net change in the fair value of financial investments. (Company disclosure)
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